Home work solutions March and April

Home work solutions March and April - MULTIPLE CHOICE...

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MULTIPLE CHOICE SOLUTIONS Chapter 11 MC11.1 X11.29 c.Nobody in the company has access to cash, therefore it cannot be stolen. MC11.2 X11.30 a.Impropriety of write-offs can be controlled by the review and approval by someone outside the credit department. MC11.3 X11.31 b. Less sales revenue and correct amount of cost of goods sold results in less gross profit, therefore the ratio of gross profit to sales will decrease. (Actually, the gross profit numerator will decrease at a greater rate than the sales denominator in the ratio, causing the ratio to decrease.) MC11.4 X11.32 d. The direction of the test establishes support for recorded amounts. MC11.5 X11.33 d. A bookkeeper could steal money and "write off" to unsuspecting customer's balance with a fictitious "sales return." MC11.6 X11.34 c.The cashier would have both custody of cash and recordkeeping responsibility, hence could steal money and fix the records without interference by anyone else. MC11.7 X11.35 c.The age of accounts is an indication of potential credit losses. MC11.8 X11.36 b. False sales journal entries made near the end of the year may have shipping or other documents that reveal later dates or show lack of sufficient documentation. MC11.9 X11.37 c. Accounts receivable confirmation enables recipients to respond that they owe the company or that they dispute or disagree with the amount the company says they owe. A response without exception, however, does not necessarily mean that the debtor will actually pay the amount, nor does it mean that the company still ‘owns’ the receivable since it may have been ‘factored’ (sold to a third party).
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MC11.10 X11.38 c.Kiting is a shell game that exploits the processing time delay between financial institutions, i.e. a cheque deposit being recorded to an account in one bank before the other amount withdrawn clears the other bank. For audit purposes, we look for a mismatching of dates of recording around year-end, and the schedule of bank transfers is designed to show all the relevant dates so the auditor can see that the entries are in the proper periods. MC11.11 X11.39 c.Checking the sequence for missing numbers identifies documents not yet fully processed in the revenue cycle. MC11.12 X11.40 a.The accounts receivable debits are supposed to represent sales that have been ordered by customers and actually shipped to them. MC11.13 x11.41 b. The existence assertion is very important because the company asserts the cash and accounts receivable reported in its financial statements are real. MC11.14 x11.42
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Home work solutions March and April - MULTIPLE CHOICE...

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